ForeClosure Charges for LIC Home Loan

POSTED BY Sandip Pawar ON August 13, 2013 4:22 pm COMMENTS (5)

Hi,

I have taken a loan of 25,40,000 Lakh in last year from LIC on floating rate. I started paying preEMI for first 4 months and then full EMI started deducting. Currently I am planning to shift my home loan to SBI bank. When I approched LIC they told there is no charges for this. But after few days I requested Quatation from LIC, they have charged 12000 Rupees as charges.

2000 Rupees for document retrival and 10000 rupess as Broken interest. I do not understand what does mean by Broken interest. As per RBI guidelines no bank can ask for any charge while transferring the loan.

Please suggest what I will have to do in this situation.

5 replies on this article “ForeClosure Charges for LIC Home Loan”

  1. Sandip Pawar says:

    Thanks Ashish

  2. Ashish Garg says:

    Yes Sandip,

    Every bank charges the proportionate interest, otherwise they are at loss.

    Ashish

  3. Sandip Pawar says:

    Thank you all for addressing my concern. Will every bank charge Broken interest in such case.

  4. Credexpert says:

    Dear Mr. Pawar,

    As per our understanding the following example would help you understand the concept of Broken interest:

    EMI due date for Bank A: 31st of each month
    Switch to Bank B on: 15th of the month
    Broken Period interest would be calculated for the gap of 15 days by Bank A since the interest for the complete 1 month period cannot be charged (assuming the switch would be effective on 15th)

    Kindly clarify the same with the bank directly.

    Regards,
    Credexpert

  5. Ashish Garg says:

    Dear Sandip,

    Broken interest is basically the interest to be paid from 1st date of the month to the date of same month in which you are going to settle your account with LIC.

    For example if you wish to settle your account on 31st August, you will pay the full month’s EMI, whereas if you settle before 31st Aug, you shall pay the amount proportionately, and that’s what LIC has termed as Broken interest.

    Ashish

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